Why are there no Tether (USDT) Redemptions? Defeats the Purpose

Jul 5, 2021 0 comments

image: coindesk.com

Why are there are no Tether redemptions happening? People and entities holding Tether know there’s no point trying to redeem it. Many believe that there is a threat to crypto if Tether Collapses. They feel that USDT is so big that none of the exchanges might want to raise alarms.

There are many who swap large swaths of USDT for USDC on Binance. There are others who are okay with USDT piling up on BitFinex. They are okay about sitting with their losses.

If the FTX exchange their commercial paper for $1 billion USDT there is no point of them ever redeeming it. If they would redeem would the peg hold. Market makers would take the risk to increase their balance if there’s no way to redeem, because they did not pay dollars for it.

What makes USDT peg fluctuate if their accounts are so opaque? The major holders of USDT got them in exchange for issuing to Tether LTD an IOU which has been denominated in USDT, but not in dollars.

Thus, they do not care if USD/USDT collapses. And many see the interest rate is negligible or the CP has restrictions about when it can be repaid? If USDT is being printed in exchange for IOUs issued by exchanges, there isn’t any reason for redemptions. Small holders can cash out in the secondary market, and exchanges would presumably just get their IOUs back.

Most tether is printed out of thin air and secondly most traders lose money. Imagine the IQ of people who purchase Tether despite knowing all these. Question arises as to do you think they’d be good traders? Even in the stock market, the vast majority of traders lose money. It is more so leveraged crypto Tether. The best incentive is to get the hell out before it blows up.

Legit or not, Tether has always been a one-way instrument for most traders because it is most useful as a means of arbitraging among exchanges that don’t hold fiat, or where traders don’t have a bank account to withdraw to. Redeeming to fiat defeats this purpose.

Many are happy going in and out of crypto using tether. People are still willing to buy Tether so much that no one had to redeem, and so little so Tether doesn’t have to issue more.

If big Tether holders actually thought Tether couldn’t be redeemed the peg would break. It just goes that the way USDC is issued and redeemed makes way more sense.

Sourced from thecurrencyanalytics.com.

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